Money management made easy

Whether you have serious financial problems, or just want to organise your finances a little better or see how you are placed for a new mortgage, your PC can help.

It's simple to get your finances up to scratch using the wizards that are built into home finance applications such as Microsoft Money and Intuit Quicken.

You'll need a few things before you start: sort out all of your latest bank statements, credit card statements and details of any personal loans, shares, unit trusts, ISAs and any other type of investment.

Once you have these in front of you, follow the wizards on screen after you have installed the software. They'll ask you for account names and details and, if you've opted for the professional versions that are powerful enough to manage the finances of a small business, they'll ask for your VAT number where applicable and other details to put on invoices.

If you're running a service business from home this may well be the only accounting system you'll need. If you're managing stock and paying people's wages, you'll want to look at some of the more powerful small accounting systems such as those from TAS Software, Sage, Quickbooks, MYOB or Simply Books.

Pay attention to detail
Beyond that, the trick of making the software work for you is to be meticulous. Enter details of everything you spend and everything you pay out and the software will analyse exactly where your money is going. The results can be a shock but they are often very useful.

Quicken user Peter Finnigan found this out the hard way when he needed to disprove some of his wife's claims about his finances during their divorce. "I fed her data in and some of the claims she was making just didn't add up," he said.

By checking up on cash withdrawals and amounts spent in shops, he was able to get a realistic idea of what he could expect in the settlement. "It's not what most people would want to use it for," he conceded. "But it did help."

Mostly, however, its role was in helping him get his life back together. "As you'll appreciate, when there's suddenly only one of you and you're having to buy out someone else's share of a house, you need to be very sure of where the next penny is coming from and what you're spending on," he said.

Having such specific requirements is quite unusual, though. It's more likely that you'll have more general needs, like Chris Comley, who started using the same system a few years ago when his "income was low and bills were high".

"I didn't need Quicken as such but it was a big help when it came to rationalising the debt and only paying one lot of interest," he explained. "It's a great way of just keeping an overview, spotting errors and so on."

Keeping track of your money
You will get a good idea of where your money is actually going once you've installed the software, but it can do a lot more than that.

During the set-up screens for Microsoft Money, for example, you can follow instructions to track your net worth, create and keep to a budget, get out of debt, plan for retirement, consider the unexpected, make payment plans for your children's education and organise money for a wedding.

Numerous financial scenarios are put to you and the program will suggest different strategies to achieve them.

Quicken takes a slightly different tack in its assessment of your needs. Rather than ask you for your financial priorities, it asks questions and then presents you with a list to create a set of accounts.

Essentially these are different approaches to achieving exactly the same thing: the organisation of your accounts and the presentation of a series of strategies to ensure that you're always up to date.

You can put in prompts when your bills are due so that you can check your bank balance and ensure that you're never short of cash for a regular payment, or call the bank in advance if you know there's going to be a problem.

You can generate charts of your money to show you more clearly where it's all going and where it is coming from.

Useful though these elements are, they are really only of any use if you're going to be on the computer regularly because an out-of-date reminder won't be much help.

Both applications will download balances and statements from your online bank account, and the big five high street banks all offer online banking.

Look after the pennies ...
Using a computer to manage your finances can be a very useful way of saving money and ensuring that your calculations are correct.

Freelance journalist Wendy Grossman bought a personal finance application for one reason only: "I figured if I didn't go overdrawn once through arithmetical error then it would have paid for itself."

It's best viewed as a series of small savings over time; the wags who tell you they spent £700 on a PC and software, and are really pleased with the tenner they've saved, are missing the point.

If you're one of these financial whizzes who can find the best savings plan and tax breaks on the back of a cigarette packet, best of luck. The rest of us mere mortals will be only too pleased with the extra peace of mind we get from our little electronic boxes. Just make sure you keep up to date.

As Finnigan says, it's all in a little discipline: "Reconciling your accounts at the end of the month is important. Inaccurate information is actually worse than no information at all."

Online resources
Starting your financial management online can seem a somewhat daunting task and many people are put off when they find that they don't have all the facts to hand when setting up their system.

As a rough guide, you should make sure you have the following documents with you when you are running your software for the first time.

• Your most recent bank statement.
• Your most recent building society/Giro savings account/other savings account details.
• Your most recent credit card statements.
• Details of any pension schemes.
• A list of standing orders from your bank. This isn't obligatory but it will help when your computer reminds you that your mortgage payment is due to be debited a week before your salary is credited.
• An ISP account so that your software can download its information from any internet bank accounts.
• A Microsoft Passport account if you're going to use the very latest version of Money. It will set one up for you if you don't already have one. You can bypass this, but it makes life easier and a little more secure.

Financial advice is swamped with regulation; nobody can offer formal financial advice without being regulated by the authorities, and it's worth mentioning that Computeractive isn't regulated in this way so please remember that suggestions in this article are pointers to websites, rather than an exhaustive guide to what's best.

The sort of sites you're likely to find useful will fall into four categories: banks, general advice, aggregators and share trade services.

The banks' sites are as straightforward as you can imagine and offer most if not all of the services you'll get in a branch, except they won't close at 4.30pm and you don't get charged for every communication they send.

Most offer a lot more besides. Lloyds TSB will take you to a small business community area with some very useful business advice, while HSBC is better than average for students.

General advice comes in many forms. Try Google for a list of financial advisors and it will throw more than 686,000 sites at you.

You can find a specific adviser online or for a pick of more general money advice. Consider checking the 'aggregators', sites that bring financial products together from a lot of companies and compare them, such as Motley Fool for investments and Moneyextra for savings.

If you want to trade shares then be aware that there are two sorts of brokers both online and elsewhere.

Independent brokers will offer advice and share trades from sites on the web, whereas transaction-only share traders, who work like share shops, execute trades for you (and take a percentage cut) but you should do the research first. Charles Schwab and SelfTrade are among the well established firms.

Free, no-fee finances
If you have a spreadsheet, you can use this to analyse your money needs free of charge. This can be an option in cases where your needs are really simple: one column for incoming money, another for outgoing.

If you make sure that the former is always higher than the latter then you have balanced your books. However, if you want to add your interest in automatically you need very good spreadsheet skills.

Trying what-if scenarios is easy with financial planning applications and you can quickly see your total outgoings if you increased your mortgage or what would happen if you managed to save an extra £20 a month off your food bill, for example.

It's possible to do this using a spreadsheet but most people would prefer to spend £30 on the software and save themselves a lot of hassle.

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